2010-29641. Requirements for Measurement Facilities Used for the Royalty Valuation of Processed Natural Gas

AGENCY:

Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), Interior.

ACTION:

Notice summarizing the requirements of royalty measurement equipment at gas plants and other processing facilities.

SUMMARY:

This notice provides information regarding the responsibilities of lessees, operators, and lessees' representatives with respect to the measurement of Federal production at gas processing plants when royalty is reported and paid on processed gas at or downstream of the plant tailgate under 30 CFR 1206.153. This equipment includes any metering, sampling, or recording devices associated with the measurement of inlet production, residue gas, fuel gas, flare gas, condensate, natural gas liquids, or any other products recovered from Federal production.

DATES:

Effective Date: This notice becomes effective December 27, 2010.

FOR FURTHER INFORMATION CONTACT:

If you have any questions regarding this Federal Register notice, please contact Mr. Kelly Johnson, Production Development Office, Gulf of Mexico, by telephone at [phone] or by e-mail at [e-mail]. To obtain copies of the most recent gas plant inspection records in the Gulf of Mexico Region, please contact Ms. Kathy Bell at [phone] or by e-mail at [e-mail].

SUPPLEMENTARY INFORMATION:

The Code of Federal Regulations (CFR) at 30 CFR 1202.151(a)(1)(ii), pertaining to royalty on processed gas, provides that royalty must be paid on the value of “residue gas and all gas plant products resulting from processing the gas produced from a lease subject to this subpart.” Since the measurement of production at gas plants and separation facilities has a direct impact on royalty reported and paid under 30 CFR 1206.153, BOEMRE has begun to inspect measurement devices at plants and separation facilities that process production from Federal leases in the Gulf of Mexico Region for compliance with established standards governing gas and liquid hydrocarbon production measurement. We have recently completed the first phase of our inspection program and will share our findings with the operators of the measurement devices at these facilities. The findings will also be made available upon request to lessees and operators who may have interest in one or more specific gas plants. In the future, we will inspect these facilities again to determine if previously observed problems have been rectified.

The BOEMRE recognizes that royalty reporting on processed gas volumes at the tailgate of an onshore gas plant is a prevalent practice in the Gulf of Mexico. To better fulfill our statutory duty to accurately determine oil and gas volumes upon which royalties are determined, we issue this notice to remind lessees and operators of their obligations to ensure accurate measurement of processed gas for which royalty is reported under 30 CFR 1206.153.

The relevant regulations found in 30 CFR part 250, subpart L, impose responsibility for compliance with gas measurement rules on lessees, operators, and lessees' representatives, including lessees who process natural gas extracted from a Federal lease in the Gulf of Mexico Region at an onshore gas plant, separation facility, or other processing facility before paying royalties on said gas. To ensure accurate measurement of processed gas, lessees and operators are responsible for working with the operators of gas plants, separation facilities, or other processing facilities to ensure the maintenance, operation, and site security in accordance with the standards set forth in 30 CFR 250.1202, 250.1203, and 250.1205, of any measurement equipment, irrespective of location or ownership, used for the measurement of production from Federal leases.

Title 30 CFR 250.1203(e) provides:

If natural gas from a Federal lease on the OCS is transferred to a gas plant before royalty determination:

(1) You must provide the following to the Regional Supervisor upon request:

(i) A copy of the monthly gas processing plant allocation statement; and

(ii) Gross heating values of the inlet and residue streams when not reported on the gas plant statement.

(2) You must permit BOEMRE to inspect the measurement and sampling equipment of natural gas processing plants that process Federal production.

Accordingly, you are given notice that BOEMRE may request assistance from lessees or operators to gain access to any gas plant, separation facility, or other processing facility which initially denies access to BOEMRE inspection personnel, for the purpose of:

• Inspecting the measurement and sampling equipment of natural gas processing plants that process Federal production;
• Remediating, in a timely manner, any observed inconsistency with gas measurement and site security standards set forth in 30 CFR 250.1202, 250.1203, and 250.1205; and
• Maintaining onsite records and providing copies, when requested by BOEMRE, of monthly allocation statements, meter or tank run tickets, gas meter volume statements, meter proving reports, or other documentation related to gas measurement.

Paperwork Reduction Act of 1995 Statement

The collections of information referred to in this notice are contained in 30 CFR part 250 subpart L, 30 CFR part 212 subpart B, and 30 CFR part 1206 subpart D. The Office of Management and Budget has approved the information collection requirements in these regulations under Office of Management and Budget Control Numbers 1010-0051, 1010-0136, and 1010-0139. This notice does not impose additional information collection requirements subject to the Paperwork Reduction Act of 1995.

Authority: 43 U.S.C. 1334.

Dated: October 22, 2010.

Robert P. LaBelle,

Acting Associate Director for Offshore Energy and Minerals Management.

Dated: October 22, 2010.

Greg J. Gould,

Director, Office of Natural Resources Revenue.